Credit Connect

The number of Scottish businesses becoming insolvent or entering receivership dropped by almost 25% compared to a year ago, according to figures from Accountant in Bankruptcy (AiB) for the first quarter of 2017-18. Compared to the first quarter of 2016-17, there were 200 corporate insolvencies, down from 265 – a drop of 24.5%.

The figure for the quarter is made up of 118 compulsory liquidations and 82 creditor voluntary liquidations. For the third quarter in succession, there were no receiverships recorded for the quarter. There were also 151 members’ voluntary liquidations, which is down from the 220 recorded in the same quarter of 2016-

Commenting on the latest figures, Minister for Business, Innovation and Energy, Paul Wheelhouse MSP, said: “These welcome low corporate insolvency numbers come in the wake of recent statistics which reveal unemployment at a record low, the Scottish employment rate rising and GDP figures showing Scotland’s growth rate to be four times that of the UK.

Commenting on the Scottish Insolvency Statistics, April to June 2017 (Q1 2017­18), Tim Cooper, Chair of R3 in Scotland “The rise in corporate insolvencies in Q1 2017-18 compared with Q4 2016-17 is a reflection of the tricky environment that Scottish firms have found themselves operating in recently, as has been the case everywhere in the UK. The corporate insolvency rate has been more or less flat for the past few years, with relatively small increases and decreases quarter by quarter. It’s worth noting, however, that corporate insolvencies are lower than they were this time last year.”

“There is a mixed picture for businesses. Research by R3 found that, in July, Scotland had the lowest rate of companies at greater than normal risk of insolvency of any part of the UK, at 21.8% – 5.5 percentage points lower than the UK average. The rate of firms at elevated risk has been growing since January 2017 though, which may have contributed to the increase seen in the figures released today.

“While Scotland’s GDP grew by 0.8% in the first three months of 2017, it contracted by 0.2% in the final three months of 2016, meaning uncertainty for firms. Rising inflation has not apparently led to greater upward pressure on wages, despite the low unemployment rate, but has meant higher input costs for manufacturers, and has dented consumer confidence. The economic outlook is still uncertain, meaning it’s more vital than ever for firms facing difficulties to take action to get themselves back on track, and to prepare for tougher trading conditions. Advice from a licenced professional is one option to consider, with early intervention leading to better outcomes.”